WAGE & HOUR LAW COMPLIANCE FOR CALIFORNIA EMPLOYERS

***Note to FALA members -- I wrote this guide originally for a lay audience comprised of employers and small business owners. It is provided to you with permission, for your information only. It is not intended to be a legal practitioner's guide. However, it does present a comprehensive view of the types of things that employers, in and out of California, should be aware of and attending to, and gives a general framework for wage and hour compliance, as well as the topics our clients should include in a wage and hour self-audit. If you are looking for a case or statute to support anything with in this guide, just let me know.***

WAGE & HOUR LAW COMPLIANCE FOR CALIFORNIA EMPLOYERS

By Jessica Christensen

For Distribution to FALA Members Only

Contents

CHAPTER 1: INTRODUCTION ........................................................................................................... 8 What Does `Wage and Hour' Law Cover? ................................................................................... 8 The California Labor Code vs. the Federal FLSA .......................................................................... 8

CHAPTER 2: WHO DO CALIFORNIA WAGE AND HOUR LAWS APPLY TO? ..................................... 10 Wage and Hour Laws Apply to `Employees'.............................................................................. 10 Employees vs. Independent Contractors .............................................................................. 10 Limited Exceptions for Exempt Employees ........................................................................... 12 Other Limited Exceptions ...................................................................................................... 12 `Employers' Are Responsible for Wage and Hour Compliance ................................................. 13 General and Special Employers ............................................................................................. 13 Joint Employers ..................................................................................................................... 13 Single Integrated Employer ................................................................................................... 14 Individual Owners Are Generally Not Liable for Wage and Hour Violations......................... 14

CHAPTER 3: GETTING TO KNOW THE WAGE ORDERS................................................................... 15 Who Do the Wage Orders Cover? ............................................................................................. 15 Industries vs. Occupations..................................................................................................... 15 Determining Which Wage Order Applies .............................................................................. 17 More Than One Wage Order Can Apply................................................................................ 17 What Wage and Hour Rules Are Covered by the Wage Orders? .............................................. 18 Special Wage Order Requirements to Know About .................................................................. 18 Agricultural Industries and Occupations ............................................................................... 19 Construction Occupations ..................................................................................................... 19 Healthcare Industries ............................................................................................................ 19 Entertainment Industries ...................................................................................................... 19

CHAPTER 4: HOURS OF WORK....................................................................................................... 20 Timekeeping Requirements ...................................................................................................... 20 Rounding Practices ................................................................................................................ 20 The 9-to-5 Schedule Trap ...................................................................................................... 21 Regular Workweeks................................................................................................................... 21 Regular Workdays ..................................................................................................................... 22 Definition of `Hours Worked' .................................................................................................... 22

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Meal and Rest Periods............................................................................................................... 23 Rest Periods ........................................................................................................................... 23 Meal Periods.......................................................................................................................... 24 `Provide' vs. `Ensure' ............................................................................................................. 25 Limited Exceptions to the Normal Meal Period Rules........................................................... 25 Meal Period Timekeeping Requirements .............................................................................. 26

Travel Time ................................................................................................................................ 27 Ordinary Travel Time ............................................................................................................. 27 Extended/Overnight Travel Time .......................................................................................... 27 Exceptions to Paying for Travel Time .................................................................................... 28 Lower Travel Time Pay Rate Allowed .................................................................................... 28 Overtime Considerations....................................................................................................... 28 Meal Periods While Traveling................................................................................................ 29

Make-Up Time ........................................................................................................................... 29 Submitting Make-Up Time Requests..................................................................................... 30 Timekeeping for Make-Up Time............................................................................................ 30

Reporting and Standby Time ..................................................................................................... 30 Reporting Time ...................................................................................................................... 31 Standby Time ......................................................................................................................... 31

Training Time and `Try-Out' Time.............................................................................................. 33 Training Time ......................................................................................................................... 33 Try-Out Time.......................................................................................................................... 33

Uniform and Protective Equipment Changing Time.................................................................. 34 24-Hour Shift Sleep Time........................................................................................................... 34 No `Off-the-Clock' Work Allowed .............................................................................................. 34 CHAPTER 5: REGULAR WAGES--HOURLY, SALARY, AND PIECE-RATE PAY ................................... 35 The Regular Rate ....................................................................................................................... 35 Minimum Wages ....................................................................................................................... 36 Different Rates of Pay for Different Types of Work .................................................................. 37 Paying Nonexempt Employees an Hourly Wage ....................................................................... 37 Paying Nonexempt Employees on a Salary Basis ...................................................................... 38 Paying Nonexempt Employees on a Piece-Rate Basis............................................................... 40

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Paying Nonexempt Employees on an Hourly/Salary Plus Commission Basis............................ 41 Exempt Commissioned Salespeople...................................................................................... 41 Nonexempt Commissioned Salespeople ............................................................................... 42

CHAPTER 6: BONUSES, PROFIT-SHARING PLANS, AND GRATUITIES ............................................. 45 Discretionary and Nondiscretionary Bonuses ........................................................................... 45 Discretionary Bonuses ........................................................................................................... 45 Nondiscretionary Bonuses..................................................................................................... 46 Gratuities ................................................................................................................................... 47 Gratuities Belong to Employees ............................................................................................ 47 Tip-Pooling Allowed............................................................................................................... 47 Service Charge Distinguished ................................................................................................ 47

CHAPTER 7: OVERTIME AND DOUBLE-TIME PREMIUM WAGES ................................................... 48 Exempt Employees Are Not Entitled to Overtime..................................................................... 48 Daily and Weekly Overtime for Nonexempt Employees ........................................................... 48 Calculating Basic Overtime Rates--Only One Pay Rate ............................................................ 49 Determining the Regular, Overtime, and Double-Time Rate for Hourly Employees ............ 49 Determining the Regular, Overtime, and Double-Time Rate for Nonexempt Employees Paid on a Salary Basis .................................................................................................................... 49 Determining the Regular, Overtime, and Double-Time Rate for Employees Paid on a PieceRate Basis............................................................................................................................... 50 Calculating the Weighted Average--Employee Earns Multiple Pay Rates ............................... 51 Retroactively Calculating Overtime Pay When Employee Earns a Nondiscretionary Bonus .... 52 Calculating Overtime Bonus Rates for Incentive-Based Bonus Plans.................................... 52 Calculating Overtime Bonus Rates for Set Bonus Plans ........................................................ 54 Calculating the Overtime and Double-Time Rate When the Employee Earns a Wage/Salary Plus Commissions ...................................................................................................................... 56 Types of Compensation that DO NOT Have to Be Included in Overtime and Double-Time Rate Calculations ............................................................................................................................... 56

CHAPTER 8: ALTERNATIVE WORKWEEKS AND OVERTIME PREMIUMS......................................... 58 Alternative Workweek Schedules Alter When Daily Overtime Is Owed ................................... 59 Implementing an Alternative Workweek Schedule................................................................... 59 Repeal of an Alternative Workweek Schedule .......................................................................... 61

CHAPTER 9: MISSED MEAL AND REST PERIOD PREMIUM WAGES................................................ 62

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CHAPTER 10: TOOLS AND EQUIPMENT, UNIFORMS, AND WORK-RELATED EXPENSES................ 63 Tools and Equipment................................................................................................................. 63 Limited Exception for Certain Hand Tools............................................................................. 63 Exception Does Not Apply to Electronic or Mechanized Equipment .................................... 63 Safeguarding of Employee-Owned Tools and Equipment in the Workplace ........................ 64 Purchase and Maintenance of Uniforms................................................................................... 64 Deductions from Wages for Tools, Equipment, and Uniforms Not Returned at Termination.. 65 Work-Related Expenses and Losses--Reimbursement and Indemnification ........................... 65

CHAPTER 11: PAID TIME OFF--VACATION, PTO, HOLIDAYS, AND SICK LEAVE ............................. 68 No `Use It or Lose It' Policies ..................................................................................................... 68 Choosing Between a Vacation Policy and a PTO Policy............................................................. 69 Rules Regarding Paid Sick Leave................................................................................................ 69 Paid Holidays ............................................................................................................................. 70 Calculating How Much Vacation/PTO Time Is Earned and Paid Out ......................................... 70 Probationary Periods and Scheduling When Vacation/PTO Time Can Be Used ....................... 71

CHAPTER 12: UNPAID TIME OFF REQUIRED OR PERMITTED BY LAW ........................................... 72 Time off for school activities and suspensions.......................................................................... 72 Time off for crime victims.......................................................................................................... 72 Time off for law enforcement and military personnel .............................................................. 73 Time off for civic activities......................................................................................................... 73 Time off for drug or alcohol treatment and literacy education ................................................ 73

CHAPTER 13: WHEN EMPLOYEES MUST BE PAID.......................................................................... 74 Regular and Premium Wages .................................................................................................... 74 Paydays for Nonexempt Employees.......................................................................................... 74 Paydays for Exempt Employees................................................................................................. 74 Safe Harbor for Late Overtime Payments ................................................................................. 74 Payment of Bonuses and Commissions..................................................................................... 75 Bonuses ................................................................................................................................. 75 Commissions.......................................................................................................................... 75 Final Wages and Waiting Time Penalties .................................................................................. 75 When Final Wages Must Be Paid........................................................................................... 75 Waiting Time Penalties.......................................................................................................... 76

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Final Wages for Layoffs.............................................................................................................. 77 Amounts Not Calculable at the Time of Separation .................................................................. 77 Severance Pay............................................................................................................................ 77 Final Wages Must Be Paid Without Condition .......................................................................... 77 No Final Pay Deductions for Wage Advances or Overpayments............................................... 78 CHAPTER 14: HOW EMPLOYEES MUST BE PAID............................................................................ 79 `Payable Without Discount on Demand' ................................................................................... 79 No Wage Payments by Scrip...................................................................................................... 80 Payroll ATM Machines............................................................................................................... 80 CHAPTER 15: DEDUCTIONS FROM WAGES ................................................................................... 81 Written Authorization Not Required......................................................................................... 81 Written Authorization Required................................................................................................ 81 Overpayments and Payroll Adjustments................................................................................... 81 Unlawful Deductions ................................................................................................................. 82 CHAPTER 16: ACCURATE WAGE STATEMENTS.............................................................................. 83 Wage Statement Must Be `Accurate' ........................................................................................ 83 Penalty for Failing to Provide Accurate Wage Statements ....................................................... 84 Responsibility for Accurate Wage Statements Does Not Shift to Payroll Processing Companies ................................................................................................................................................... 84 CHAPTER 17: RECORDKEEPING REQUIREMENTS .......................................................................... 85 Timekeeping and Payroll Records ............................................................................................. 85 Employees Have a Right to Inspect Payroll Records and Personnel Files ................................. 85 Records Must Be Kept in California ........................................................................................... 86 CHAPTER 18: PAY-RELATED DISCRIMINATION, MISREPRESENTATIONS, AND MISCELLANEOUS RULES............................................................................................................................................. 87 Equal Pay Laws .......................................................................................................................... 87 Unlawful Employment Inducements ......................................................................................... 87 Immigration Status Not Relevant to Wage Claims .................................................................... 88 Wage and Working Condition Disclosure.................................................................................. 88 Whistleblower Protections ........................................................................................................ 88 No Fees May Be Charged to Job Applicants .............................................................................. 88 Special Rules Related to Collective Bargaining Agreements ..................................................... 89

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CHAPTER 19: PENALTIES FOR NOT GETTING IT RIGHT .................................................................. 90 CHAPTER 20: PREVENTION IS THE BEST PROTECTION .................................................................. 92 CHAPTER 21: RESPONDING TO WAGE AND HOUR COMPLAINTS ................................................. 93 CHAPTER 22: KEY MISTAKES TO AVOID MAKING .......................................................................... 94

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CHAPTER 1: INTRODUCTION

California's unique and numerous wage and hour laws are of great concern to employers in the state, and rightfully so. They are often different ? and more demanding of employers ? than their federal counterparts, and the penalties for noncompliance can be tremendously steep.

In this exclusive Report, we'll help you navigate the California wage and hour minefields by telling you what you need to be thinking about, how to get and stay in compliance, and how to avoid the common, costly mistakes that many employers make. We'll also give you practical tips for meeting your legal obligations while reducing everyday wage and hour headaches. We've also included a handy wage and hour compliance checklist to help you make sure nothing slips through the cracks.

What Does `Wage and Hour' Law Cover?

The term "wage and hour" generally refers to the rules governing employees' wages, hours, and working conditions. In California, these rules are set out in the California Labor Code and the Wage Orders of the California Industrial Welfare Commission (IWC). The Labor Code and IWC Wage Orders cover every aspect of scheduling and paying employees on a day-to-day basis as well as a number of other areas, including:

? meal and rest breaks ? tools, uniforms, and equipment ? paid and unpaid time off ? wage statements and recordkeeping ? pay deductions ? pay-related whistleblowing, discrimination, and harassment ? employee travel pay requirements ? work-related expenses ? and much more

Within each category of rules, there are often special requirements depending on how the employee is paid, the type of work the employee performs, and which industry the employer is in.

The California Labor Code vs. the Federal FLSA

All employers in California must comply with both the California rules and the rules contained in the federal Fair Labor Standards Act (FLSA). With very few exceptions, if you're complying with California law, you're also complying with the FLSA.

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